Status quo on TNB after electricity discounts
KUALA LUMPUR: Analysts maintained their stock calls on Tenaga Nasional Bhd (TNB) following the government’s programme called Bantuan Prihatin Elektrik (BPE).
Minister of Energy and Natural Resources Dr Shamsul Anuar Nasarah last week announced another aid program to help reduce the burden that Malaysians are currently facing due to the increase in electricity consumption during the Movement Control Order (MCO) period.
Under the program, all domestic customers will receive free electricity for the first usage of 300kWh per month, and an additional eight per cent discount for consumption between 601 to 900kWh per month for a period between April to June 2020.
The research team at Public Investment Bank Bhd (PublicInvest Research) said the initiative will help to mitigate TNB’s credit risk in relation to the domestic sector for April to September as the government will now underwrite potential delinquencies from this customer segment.
“BPE is an additional aid program for domestic customers that is jointly funded by the Government and TNB, offering free electricity by up to RM77 per month, which is equivalent to the usage of the first 300kWh during the three-month MCO period between April to June 2020,” it said yesterday,.
“In addition, households will also receive an additional eight per cent discount for usage between 601 to 900kWh per month, on top of the two per cent discount announced earlier in March 2020.
“These discounts will be for a period of three months effective April to June 2020. The discounts will be included as lump-sum amount in the July bill.
The total amount of the discounts is RM942 million, of which RM100 million will be funded by TNB, with the remainder by the Kumpulan Wang Industri Elektrik.”
On Sunday, TNB chairman Datuk Seri Mahdzir Khalid said although four million consumers would be enjoying free electricity supply for three months, matters pertaining to TNB’s infrastructure maintenance would proceed as usual.
“This is a shared responsibility between the government and TNB, so it will not be a problem for TNB.
“We are doing this for the benefit of the people, so everything that is related to electricity supply, wiring connections, repairs and maintenance will not be affected,” he said when asked about the additional aid announced on Saturday by Energy and Natural Resources Minister Datuk Dr Shamsul Anuar Nasarah.
Mahdzir said TNB would intensify its consumer briefing sessions to give the public a better understanding of the aid and how consumers were being billed according to the tariff block and rates.
Overall, PublicInvest Research estimated that TNB will absorb about RM250 million (including previous stimulus packages) from the total incentives announced for the year, though the net effect will be lower due to anticipated tax savings from the deductible expense.
“We deem it manageable at less than five per cent of our FY20F net profit. TNB’s cash balance as at the first quarter of financial year 2020 remains healthy at RM16 billion,” it added.
“We maintain our neutral call on TNB, with unchanged target price of RM13.28 per share.”
AmInvestment Bank Bhd (AmInvestment Bank) in its own calculations said the total electricity discounts made up 6.4 per cent of TNB’s FY20 net profit of RM3.9 billion.
“In December 2019, TNB transferred RM774 million to the Energy Industry Fund to aid in the stabilisation of the electricity tariff via a buildup of the fund,” it said in a separate report.
“TNB returns savings from renegotiated power purchase agreements and excess returns when its revenue exceeds the price and revenue caps in the RP2 guidelines, to the Energy Industry Fund every year.
“We maintain buy with a fair value of RM13.95 per share.”